End the surprise insurance gap

Diagnosis Is Not the End, but the Beginning of Practice

Date created

Thu, 06/20/2019 - 12:36

Washington, D.C., is focusing like a laser on the issue of “surprise billing.”

Surprise billing is what the wonks refer to as the circumstance when a patient receives an unexpected bill after treatment that his or her insurance company won’t cover. This could happen if you receive treatment at a facility on an emergency basis that is out of network or even if you receive a procedure at your in-network facility, but the physician or some other medical technician who performed the procedure is out of network.

These surprises can be quite pricey — sometimes amounting to thousands of dollars. Policymakers in Washington are determined to put an end to it. And if you’ve experienced it, you’re probably ready for them to act yesterday.

 

The admonition by the famous American physician Martin Fischer that “diagnosis is not the end, but the beginning of practice” is particularly applicable in this case. Rushing in with solutions without understanding their implications for the broader health insurance industry could make access to health care harder for patients or lead to dramatic premium hikes for so-called in-network treatment.

First, a little background. The in-network/out-of-network distinction that requires insurance providers to seek pre-approval for some out-of-network services is in place to keep prices down and enable providers to distinguish themselves from the competition. The doctors and other medical technicians in-network have pre-negotiated rates for their services and procedures.

Often, an insurance company will recruit highly regarded specialists to work primarily in their network as a means to serve their patients as well as to distinguish the insurance company from its competitors. But when you seek treatment out of network, those costs are often not pre-negotiated, so these other specialists may request reimbursement substantially higher than your plan provides for.

A solution that eliminates the networks would harm cost savings or minimize the likelihood that an insurance company will ever recruit exceptional specialists. That could mean fewer in-house specialists and higher premiums for the insured when their services are needed.

Alternatively you can’t simply impose a requirement that your insurance company cover all out-of-network fees. This might appear to be the simplest solution, but it too would lead to ballooning premiums and make it harder for health insurance companies to pre-negotiate lower reimbursement rates. After all, as a specialist, if you’ll get paid whatever you charge, why associate with any insurance company?

And you can’t make the specialists or medical providers accept whatever fee a given insurance company desires. This option will make fewer specialists available and mean that patients’ treatment options would be significantly reduced.

Washington must find a way to protect patients and reduce unanticipated health care costs without harming health care providers or insurers. Three primary answers to this nettlesome problem have been tried individually with varying degrees of failure and limited success: network matching, market-based rate benchmarks, and arbitration.

Network matching requires hospital-based physicians to participate in the same health plan networks as the facilities in which they practice. Rate benchmarks refer to set payments in the “usual and customary” ranges to physicians and hospitals in exchange for services. Arbitration, of course, can come in a variety of shapes and sizes, but generally involves a third-party arbiter helping insurers and health care providers settle on prices that both sides can stomach.

A hybrid combination of these dispute resolution measures could provide a federal antidote to the venomous sting of surprise billing and yield a stable, cost-effective compromise system that protects patient interests without crippling doctors, hospitals and insurance providers. The hybrid would establish an “interim payment standard” for out-of-network payments and require binding arbitration to resolve the thornier disputes.

It would work like this: When an out-of-network provider treats a patient at an in-network facility or provides emergency care, the insurance plan would make an “interim direct payment” to the out-of-network provider. If the provider is out of network but used to be in-network at some point earlier, the IDR would simply be the previously contracted rate, preserving the status quo until the parties could reach a new participation agreement.

If, however, the provider was never in the plan’s network, the IDR would align with the market rate for similar plans and providers in the provider’s geographic area. This approach which would reduce the variation in out-of-network payments and generate significant savings for plans and patients.

The interim payment standard offers plans and providers two benefits: It will reduce friction and expense in “no fault” or incidental out-of-network cases, and it should dramatically reduce the need for arbitration insofar as the IDR provides a way to pay the majority of claims at reasonable market prices.

In cases in which either party remains dissatisfied with the IDR, the matter would be heard by a neutral arbiter. The plan and provider would submit their first offer for payment, and the arbiter would choose the most reasonable one.

To make that determination, the arbiter would consider any prior relationship between the plan and the provider, including previous in-network rates; the in-network rates for similar participating providers and plans in the same geographic area; the provider’s training, experience, specialization, and outcome metrics; the circumstances and complexity of the case; and other relevant economic and clinical circumstances.

Combining an IDR and binding arbitration will solve several persistent challenges. It will avoid, for instance, the usual brawl over rate benchmarks (e.g., physician rates versus Medicare rates). It will ensure that current network contracts remain in place and are extended on an equitable basis to plans and providers.

It will protect the value-based arrangements that providers and plans have already reached in their network agreements. And it will foster a self-reinforcing system in which the need for arbitration should eventually and substantially decline.

 

In adopting such a hybrid, Congress would eliminate surprise billing but do so in a way that gives patients access to lower costs, specialists and the highest care possible. This solution also encourages specialists and treatment facilities to associate with health plans without mandating any association allowing the plans to continually compete on quality, price and service.